[1996] 3 C.F. 468
T-1818-91
D and J Coustas Shipping Company S.A., a body corporate, and Sveriges Angfartygs Assurans Förening, a body corporate (Plaintiffs)
v.
Her Majesty the Queen in Right of Canada, as represented by the Minister of National Revenue, and the Minister of National Revenue (Defendants)
Indexed as: D and J Coustas Shipping Co. v. M.N.R. (T.D.)
Trial Division, MacKay J.—Halifax, November 15, 1995; Ottawa, June 4, 1996.
Customs and Excise — Customs Act — Special case for final adjudication in lieu of trial — Ship seized as forfeit after heroin discovered thereon — Whether Parliament intending s. 110 forfeiture apply to circumstances as those herein — Letter of undertaking (LOU) provided in exchange for release of ship — Order issued under Customs Act, s. 139 — Revenue Canada denying s. 141 application for return of LOU — S. 141 providing Deputy Minister shall, on application by person obtaining final order under s. 139, direct “thing” be given to applicant — Plaintiffs not entitled under s. 141 to return of LOU — When seized as forfeit, ship lost as penalty — When ship returned under s. 118, security held as forfeit — “Thing” thing seized — S. 141 not applicable as thing seized (ship) already returned — No right to hold LOU as forfeit — By s. 139 order owner’s interest in ship not affected by seizure, not forfeit to Crown — Where conveyance not subject to forfeiture, security held in lieu thereof not subject to forfeiture.
This was a special case for final adjudication of an action in lieu of a trial pursuant to Rule 475 of the Federal Court Rules. The plaintiff’s ocean-going container ship was seized as forfeit after customs officers discovered heroin thereon. On receipt of the plaintiff insurer’s letter of undertaking to pay $100,000 upon written demand from the seizing customs officer, the Department of National Revenue released the ship pursuant to Customs Act, section 118. Under section 121, the security provided in lieu of the ship is held as forfeit and the ship upon its release ceases to be forfeit. The Minister decided pursuant to section 131 that the conveyance had been used in respect of goods in respect of which the Customs Act or regulations had been contravened and pursuant to section 133, demanded payment of $92,620, which has not been paid. Before the Minister’s decision, the County Court of Nova Scotia had issued an order pursuant to section 139 declaring that at the time of the alleged contravention, the mortgagee had a first priority charge on the vessel and the owner held an equity of redemption which had no monetary value. The order declared that those were the only interests in the title of the ship and that those interests were not affected by the seizure. The order also stated that the owner and mortgagee were not involved in the alleged contravention of the Act, that they had acquired their interests in good faith prior to the alleged contravention of the Act, and that the mortgagee exercised all reasonable care to satisfy itself that the vessel was not likely to be used in contravention of the Act. After receipt of the Minister’s decision under section 131 the plaintiff applied pursuant to section 141 for return of the security represented by the letter of undertaking. Section 141 provides that the Deputy Minister shall, after forfeiture of a thing has become final and on application by a person who has obtained a final order under section 139, direct that the thing be given to the applicant. Revenue Canada denied the application on the basis that as the ship had been returned in accordance with section 118, the section 139 order had no impact on the section 129 et seq. review procedures. The plaintiffs appealed the Minister’s decision by way of this action.
The issues were whether the plaintiffs were entitled under section 141 to return of the letter of undertaking and whether the defendants were entitled to hold the letter of undertaking as forfeit.
Held, the plaintiffs were not entitled to return of, and the defendants had no right to retain as forfeit, the letter of undertaking.
It was questionable whether Parliament intended the section 110 seizure as forfeit provision to apply in circumstances such as those at bar. If that was the intention, it would mean that the owner of a commercial international carrier of goods could face forfeiture of its vessel or other conveyance as the result of the criminal actions of those for whom it had no responsibility. That issue had not, however, been raised by the parties herein and was therefore not determined.
When seized as forfeit, goods or conveyances are lost to Her Majesty as a penalty. They are not held as security for payment of duty or other penalty imposed under the Act. Where the seized goods or conveyances are returned under sections 117 to 119 they cease to be forfeit, and the money paid or security given for their return are then held as forfeit in lieu of the goods or conveyances. The “thing” referred to in section 141 is the goods or conveyance seized, not the money or security accepted in lieu thereof upon release of a “thing” seized. Since the seized ship had already been returned, section 141 did not apply and the Deputy Minister was not required under that section to return to the plaintiffs the letter of undertaking.
By the section 139 order, the owner’s interest in the ship was declared not to have been affected by the seizure, and thus not forfeit to the Crown by way of penalty. Where the conveyance is not subject to forfeiture, security held in lieu thereof when it is released is also not subject to forfeiture. The Minister has no authority to demand payment of a debt as penalty, whether the matter held as forfeit is the seized goods or conveyance, or money or security given for their release. The Minister has no authority to refuse return of the total moneys paid or security given where so requested by the owners of all interests in the conveyance who have been found entitled to an order under section 139, since their interests are not affected by the seizure and are not subject to forfeiture.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Customs Act, R.S.C., 1985 (2nd Supp.), c. 1, ss. 2 “forfeit”, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141.
Federal Court Rules, C.R.C., c. 663, R. 475.
AUTHORS CITED
Shorter Oxford English Dictionary. Oxford: Clarendon Press, 1988, “forfeit”, “seize”, “seizure”.
SPECIAL CASE for final adjudication of an action in lieu of a trial wherein the principal issue was whether the plaintiffs, having obtained a court order pursuant to Customs Act, section 139 were entitled under section 141 to return of security given upon release of the ship that had been seized as forfeit on the ground that it was a conveyance used in respect of goods brought into Canada in contravention of the Act. The plaintiffs were not entitled to return of, and her Majesty had no right to retain as forfeit, the security.
COUNSEL:
James E. Gould, Q.C. and Vern DaRe for plaintiffs.
Martin C. Ward for defendants.
SOLICITORS:
McInnes Cooper & Robertson, Halifax, for plaintiffs.
Deputy Attorney General of Canada for defendants.
The following are the reasons for order rendered in English by
MacKay J.: This is a special case brought by agreement of the parties for final adjudication of an action in lieu of a trial pursuant to Rule 475 of the Federal Court Rules, C.R.C., c. 663, as amended. The parties are agreed that all matters at issue in the action shall be determined on the basis of the certified record filed which includes the statement of claim and defence, and the stated special case, with an agreed statement of facts and principal issues, and documents appended thereto.
In particular the parties seek determination of a principal question, set out in the agreed statement of facts, whether the plaintiffs, having obtained a court order pursuant to section 139 of the Customs Act, R.S.C., 1985 (2nd Supp.) c. 1 (the Act), are entitled under section 141 of that Act to return of security earlier given by one of the plaintiffs upon the release to the plaintiff owner’s captain of the ship that had been seized as forfeit on the ground it was a conveyance used in respect of goods brought into Canada in contravention of the Act. Since, in my view, determination of that question does not resolve all matters at issue in the action, as raised by the parties’ pleadings, these reasons also address another key issue.
This matter came on for hearing at Halifax on November 15, 1995 when decision was reserved. These are the reasons for an order, now issued, determining the application of section 141 of the Act in the circumstances of this case.
Background
The plaintiff D and J Coustas Shipping Company S.A., a Panamanian company managed by a company based in Cyprus and carrying on business in Greece, at the material times was the owner of the motor vessel Hoegh Mary (the vessel). The vessel, an ocean-going cargo container ship, is registered under the Greek flag at the port of Piraeus, Greece. The second plaintiff (the insurer), Sveriges Angfartygs Assurans Förening, is incorporated under the law of Sweden, and was an insurer of the vessel. A first preferred registered ship’s mortgage was held on the Hoegh Mary by the Royal Bank of Scotland plc. The vessel’s master was a Greek national, as were its other officers, and it was manned by a crew mainly from Sri Lanka.
On January 25, 1989 the vessel arrived at the Port of Halifax. On that date officers from the Royal Canadian Mounted Police and from Canada Customs, acting in the course of an investigation into heroin trafficking, undertook surveillance of the vessel and, after following to a hotel room a person who had just left the ship, they found approximately 400 grams of heroin. The officers then obtained a search warrant and boarded the vessel where they discovered a further 71.7 grams of heroin, after questioning and information provided by some crew members.
The vessel was seized as forfeit on that date, January 25, 1989, pursuant to section 110 of the Act which provides that:
110. (1) An officer may, where he believes on reasonable grounds that this Act or the regulations have been contravened in respect of goods, seize as forfeit
(a) the goods; or
(b) any conveyance that the officer believes on reasonable grounds was made use of in respect of the goods, whether at or after the time of the contravention.
(2) An officer may, where he believes on reasonable grounds that this Act or the regulations have been contravened in respect of a conveyance or in respect of persons transported by a conveyance, seize as forfeit the conveyance.
The basis for the seizure, as set out in a seizure receipt, was that the vessel was a conveyance “made use of in the importation of goods subject to forfeiture under the Customs Act”.
Upon representations of the owner and others interested in the vessel, the Department of National Revenue, on behalf of the Minister, then requested $100,000 as security for its release, based on the value of the heroin believed to have been imported in contravention of the Act. After discussions with the plaintiffs’ solicitors the Department agreed to accept a letter of undertaking from the plaintiff insurer, pursuant to section 118 of the Act which provides as follows:
118. An officer may, subject to this or any other Act of Parliament, return any conveyance that has been seized under this Act to the person from whom it was seized or to any person authorized by the person from whom it was seized on receipt of
(a) an amount of money of a value equal to
(i) the value of the conveyance at the time of seizure, as determined by the Minister, or
(ii) such lesser amount as the Minister may direct; or
(b) where the Minister so authorizes, security satisfactory to the Minister.
The second plaintiff, the insurer, provided a letter of undertaking, pursuant to paragraph 118(b), and the vessel was released from seizure on January 26, 1989. The letter provided, inter alia, that, in consideration of the release and return of the vessel, upon written demand from the seizing customs officer, the insurer would pay to the Receiver General for Canada any sum demanded, not exceeding $100,000; and further that it was agreed the giving and acceptance of the undertaking and payment of any sums thereunder
… shall be without prejudice to any rights or claims which are or may be available to us, the Ship’s owners, mortgagees, or others interested in the Ship to contest or dispute in any proper forum the seizure of the Ship, the provision of this undertaking in lieu thereof in order to obtain release and return of the Ship, the payment of any sum or sums hereunder, or to otherwise seek enforcement of any rights or claims which are or may be available to us, the Ship’s owners, mortgagees or others interested in the Ship with respect to, arising out of, or in any way connected with the seizure of the Ship.
Under section 121 of the Act the security provided in lieu of the vessel is held as forfeit and the vessel upon its release ceased to be forfeit. That provision is as follows:
121. Goods or conveyances in respect of which money or security is received under section 117, 118 or 119 shall cease to be forfeit from the time the money or security is received and the money or security shall be held as forfeit in lieu thereof.
On March 7, 1989 the owner, among others, requested a decision from the Minister pursuant to section 129 of the Act, relating to the seizure and forfeiture of the vessel. That section permits any person from whom a conveyance is seized or who owns such a conveyance to request a decision from the Minister under section 131, whether the conveyance was made use of in respect of goods in regard to which the Act was contravened, and whether the Act was so contravened. By notice dated March 20, 1989, Revenue Canada, Customs and Excise, Adjudications Division, on behalf of the Deputy Minister of National Revenue, advised that the seizure of the vessel was made for the reason that “the said conveyance was made use of in the importation of goods subject to forfeiture under the Customs Act”.
In response to this decision, written submissions were made by the owner, among others, to the Adjudications Division of Revenue Canada, Customs and Excise with respect to the seizure and forfeiture of the vessel. The Act provides for a decision by the Minister in relation to a questioned seizure and forfeiture, in the following terms:
131. (1) After the expiration of the thirty days referred to in subsection 130(2), the Minister shall, as soon as is reasonably possible having regard to the circumstances, consider and weigh the circumstances of the case and decide, in respect of the goods or conveyance that was seized ….
…
(b) in the case of a conveyance seized … on the ground that it was made use of in respect of goods in respect of which this Act or the regulations were contravened, whether the conveyance was made use of in that way and whether the Act or the regulations were so contravened.
(2) The Minister shall forthwith on making a decision under subsection (1) serve on the person who requested the decision written notice thereof.
(3) The Minister’s decision under subsection (1) is not subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with except to the extent and in the manner provided by subsection 135(1).
On April 15, 1991, the Department provided notice of the decision, addressed to the vessel, in care of the shipping agent in Canada, made pursuant to section 131 of the Act. By that decision it was concluded that “the conveyance was made use of in respect of goods in respect of which the Customs Act or regulations were contravened”. That notice also advised of a further decision, apparently made pursuant to section 133, to demand payment of $92,620, which constituted a debt due to Her Majesty. Section 133, which permits the Minister to demand payment where there has been a contravention of the Act as described in paragraph 131(1)(b), provides, in part, as follows:
133. (1) Where the Minister decides, pursuant to section 131, that there has been a contravention of this Act or the regulations in respect of the goods or conveyance referred to in that section, and, in the case of a conveyance described in paragraph 131(1)(b), that it was used in the manner described therein, the Minister may, subject to such terms and conditions as he may determine,
(a) return the goods or conveyance on receipt of an amount of money of a value equal to an amount determined under subsection (2) or (3), as the case may be;
(b) remit any portion of any money or security taken; and
(c) where the Minister considers that insufficient money or security was taken or where no money or security was received, demand such amount of money as he considers sufficient, not exceeding an amount determined under subsection (4) or (5), as the case may be.
I note that at the time this special case was heard the sum demanded by the Minister had not been paid and the Department continued to hold the letter of undertaking providing for payment in an amount up to $100,000 as security for the vessel that had been released.
Before the Minister’s decision, on March 16, 1989, the first plaintiff and the mortgagee of the vessel, Royal Bank of Scotland plc, had applied to the County Court in Nova Scotia pursuant to section 138, seeking an order pursuant to section 139 declaring that their interests in the vessel were not affected by the seizure and declaring the nature and extent of their interests in the vessel at the time of the alleged contravention of the Act. Anderson J. of that Court, after concluding the issue was not moot, ordered on October 26, 1989, on consent of the Crown as to the terms of the order, that at the time of the alleged contravention the mortgagee had a first priority charge on the vessel valued at $16,500,000 and the owner held an equity of redemption, with respect to the mortgage, which was of no monetary value. The order further declared that those two interests represented all legal and equitable interests in the title of the ship outstanding at the time of the alleged contravention of the Act, and that those interests were not affected by the seizure. In addition, as set out in recitals to his order, Anderson J. found that the owner and the mortgagee were innocent of any complicity in the alleged contravention of the Act, that they acquired their interests in good faith prior to the alleged contravention of the Act and that the mortgagee exercised all reasonable care in respect of the mortgagor, the owner, to satisfy itself that the vessel was not likely to be used in contravention of the Act.
Sections 138 and 139 provide as follows:
138. (1) Where anything has been seized as forfeit under this Act, any person, other than the person in whose possession the thing was when seized, who claims an interest therein as owner, mortgagee, lien-holder or holder of any like interest may, within sixty days after such seizure, apply by notice in writing to the court for an order under section 139.
…
139. Where, on the hearing of an application made under section 138, it is made to appear to the satisfaction of the court
(a) that the applicant acquired the interest in respect of which he is applying in good faith prior to the contravention or use in respect of which the seizure was made,
(b) that the applicant is innocent of any complicity in the contravention of this Act or the regulations or the use of a conveyance that resulted in the seizure and of any collusion in relation to that contravention or use, and
(c) that the applicant exercised all reasonable care in respect of any person permitted to obtain possession of the thing seized to satisfy himself that it was not likely to be used in contravention of this Act or the regulations or, where the applicant is a mortgagee or lien-holder, that he exercised such care with respect to the mortgagor or lien-giver,
the applicant is entitled to an order declaring that his interest is not affected by such seizure and declaring the nature and extent of his interest at the time of the contravention or use.
After receipt of notice of the Minister’s decision made under section 131, on May 15, 1991 the plaintiff made an application pursuant to section 141 of the Act, for cancellation and return of the security represented by the letter of undertaking given by the second plaintiff. That section provides that,
141. (1) The Deputy Minister or an officer designated by him shall, after forfeiture of a thing has become final and on application made to the Deputy Minister by a person who has obtained a final order under section 139 or 140 in respect of the thing, direct that
(a) the thing be given to the applicant; or
(b) an amount calculated on the basis of the interest of the applicant in the thing at the time of the contravention or use in respect of which the thing was seized, as declared in the order, be paid to him.
(2) The total amount paid under paragraph (1)(b) in respect of a thing shall, where the thing was sold or otherwise disposed of under this Act, not exceed the proceeds of the sale or disposition, if any, less any costs incurred by Her Majesty in respect of the thing, and, where there are no proceeds of a disposition of a thing under this Act, no payment shall be made pursuant to paragraph (1)(b) in respect of the thing.
On July 11, 1991, Revenue Canada, Customs and Excise denied the application for return of the letter of undertaking on the basis that, “as the vessel was returned in accordance with section 118 of the Customs Act”, the order rendered by Anderson J. under section 139 of the Act “has no impact on the review procedures of section 129 et seq. of the Customs Act”. For the Deputy Minister (Customs and Excise) the Department further advised that the only process for review of the Minister’s decision of April 15, 1991, would be in the form of judicial review in accord with section 135 of the Act.
I note that by their statement of claim the plaintiffs allege that prior to the request made under section 141, they had made representations concerning invalidity of the seizure and forfeiture, seeking return of the security posted for the vessel. In part, the statement of claim alleges:
12. The Plaintiffs say that upon or shortly following seizure of the Ship and its release and return upon provision of security, and particular reference is made to the application to the County Court noted above, the Defendants were notified and fully aware that there was no existing interest in the Ship which could be affected by the seizure, and such was confirmed by an Order of the County Court as noted above on October 26, 1989. The Plaintiffs asserted the position that there being no interest which could be attached by seizure and/or forfeiture, any security provided in lieu of the Ship should be surrendered, cancelled and returned as a result, and communicated such to the Defendants at an early date. Notwithstanding this, the Adjudications Division of Revenue Canada, Customs and Excise, has applied or mis-applied the law and its practice and procedures in such a way as to force the Plaintiffs and the Mortgagee to indulge in costly and time consuming legal representation, and it has ignored the lawful Order made by the County Court, and alleged or maintained that somehow, even though the seizure could not affect any interest in the Ship, they are entitled to retain the security and entitled to be paid the sum demanded of $92,620.00 plus interest, all representing or being acts of bad faith, and furthermore, have unreasonably and in bad faith, denied the application under s. 141 of the Customs Act.
Following the refusal to return the letter of undertaking under section 141, in accord with section 135, which provides for an appeal of the Minister’s decision by way of an action in this Court, the plaintiffs filed a statement of claim which was answered by a defence filed on behalf of the defendants. Thereafter agreement between the parties led to this application for adjudication of this special case.
In the agreed statement of fact and principal issues, filed with this special case, the parties agree that:
The principal question to be decided is whether or not the Owner [i.e. the first plaintiff] and the Insurer [i.e. the second plaintiff], having obtained an Order under s. 139 of the Act, are entitled under s. 141 to the return of the security in the amount of up to $100,000.00 provided by the Insurer by way of the LOU [Letter of Undertaking] to the Department, and more particularly to cancellation, surrender and withdrawal of all demands for payment under the LOU or otherwise, when the Vessel has been returned to the Master by the Department following provision of that security. This will require a determination as to whether or not the words “the thing” in s. 141 refer exclusively in this context only to the Vessel itself as contended by the Department, or whether those words should also be construed so as to include any money or security provided pursuant to the provisions of the Act as claimed by the Plaintiffs.
Submissions of the parties
On behalf of the plaintiffs it is submitted that the word “thing” as found in section 141 of the Act includes security remitted to the Minister in exchange for the forfeited conveyance. Section 121 of the Act, which provides that security given on release of the vessel is to be held as forfeit in lieu of the conveyance, in the plaintiffs’ view, must be considered in applying section 141 so that “the thing” in the latter provision is interpreted as including either the conveyance seized or security held in lieu thereof.
In the plaintiffs’ opinion, interpreting section 141 in a manner that would exclude security from being returned to an applicant who has obtained a court order under section 139 would lead to absurd consequences. The plaintiffs submit that if they are not able to recover the security given under section 141, then they are unable to obtain return of that security under the Act, despite the fact that there is a court order indicating that they are innocent of complicity in the contravention of the Act and that their interests are unaffected by the seizure. The plaintiffs claim that it would be an absurd result for them to have a right to return of the vessel if they had chosen to have the Department retain it as forfeit, but that they do not have a right to claim the security given in lieu of the vessel. In their opinion, the interpretation advanced by the Minister would permit the Minister to keep the security no matter what the outcome of the Court procedure intended to protect their interests as third parties not implicated in the contravention of the Act. There would be no effect of the Court’s order in relation to the Minister’s right to withhold security given upon release of a conveyance seized under the Act.
The plaintiffs submit that the security is to be held on the same terms and conditions as the vessel would have been held had no security been provided for its return. That, it is said, is clearly intended by section 121 providing that security received upon release of a seized conveyance “shall be held as forfeit in lieu thereof”. In the plaintiffs’ view, it would be absurd for the Minister to be able to retain security given in exchange for return of a conveyance where he or she cannot retain the conveyance itself. The plaintiffs submit that legislation is to be interpreted so as to avoid absurd consequences, and on that basis, the word “thing” in section 141 must include security provided in lieu of a seized conveyance. In addition, it is said that the word “security” does not itself imply an irrevocable payment, indicating that it may be returned under the Act.
The defendants submit that the purpose of the Act is to raise revenue for the Government and the Act should be interpreted accordingly. In the view of the defendants, section 132 of the Act provides that where the Minister has determined under section 131 that the Act has not been contravened or that a seized conveyance was not used in respect of goods in contravention of the Act, he or she shall return the conveyance or the security held in lieu thereof to an applicant. Thus, it is said, the Act does provide a mechanism for return of the security provided where the forfeiture is not in accord with the Act. Here the validity of the forfeiture has not been determined to be improper or invalid and there is no provision for return of the security given to meet a demand for payment of assessed amounts or penalties imposed under the Act.
In addition, the defendants note that various other provisions in the Act, such as subsection 132(1) and section 133, explicitly include reference to the return of a conveyance or goods seized, or of security or money taken in lieu of those upon their release. On that basis, it is said, the Act implicitly excludes security from section 141 where no specific reference is made to it. Moreover, it is said that the fact that sections 118, 121 and 141 were enacted simultaneously indicates that Parliament intended to exclude from section 141 security tendered because it is explicitly mentioned in sections 118 and 121 in addition to goods and conveyances seized but it is not specifically mentioned in section 141. In the statement of defence filed on behalf of the defendant it is said:
15. … that there is no authority pursuant to s.141(1) of the Customs Act for the Deputy Minister to direct that security received pursuant to s. 118 for the release of a thing seized as forfeit, be returned to a person who has obtained an order pursuant to s. 139 declaring that the Applicants’ interest in the thing seized is not affected by the seizure, where the thing has been returned to the person from whom it was seized at the time of the order.
I do not find these particular submissions persuasive in themselves. In my view the purposes of particular sections differ within the overall or general purposes of the Act and it is not surprising that they do not all refer to goods or conveyances seized and security or money held in lieu of those when released. Further, the lack of specific provision within section 141 for return of security held as forfeit in lieu of a conveyance seized and released does not in itself resolve any issue of the right of the defendants to retain the security held as forfeit in circumstances where an order under section 139 has determined that the interests of all owners in the conveyance seized are not affected by the seizure.
The defendants claim that use of the word “thing” in section 141 refers to something that has been seized and is capable of seizure. In the view of the defendants, security provided, is not something which has been seized; rather, it is voluntarily provided in order to gain the return of a seized item. For the defendants, section 141 has a plain meaning which has no application in the circumstances of this case since “the thing” to be returned must be the goods or conveyance seized as forfeit, and here the conveyance seized has already been returned.
On behalf of the defendants it is submitted that sections 138 through 141, which relate to third party procedures, provide for a detailed inquiry into both title to the conveyance seized and into the conduct of an applicant under section 138. The defendants maintain that this is a separate process from that found in the main process set out in sections 128 through 137, by which a person may gain return of seized goods or a seized conveyance or of security given for them. The third party process in sections 138-141 is said by the defendants to create an exemption from forfeiture in which the Crown may effectively forego its interest in the forfeited item in the circumstances established under section 139.
The defendants submit that if section 141 were to be interpreted as including a right to the return of security, results which are not intended by Parliament could result. For example, it is said, a conveyance owner who possesses a declaration pursuant to section 139 would be in a position to demand the return of security posted by another party. In my view, section 141 is not intended to protect the interest of a person who may have posted security, unless that person is one with an interest in title of the goods or conveyance who has an order under section 139. In any event where the owner’s interest is less than the total value of the thing seized, any demand by an owner would be limited, by the terms of paragraph 141(1)(b) and subsection 141(2), to an amount calculated on the basis of the interest of the applicant as declared by the order, within the total proceeds of the sale or disposition of “the thing”.
Analysis
After consideration of the submissions of counsel and review of the Customs Act, in particular sections 110 to 123 and 128 to 141, I am left with reservations whether the provision for seizure as forfeit of a conveyance under section 110 of the Act is intended by Parliament to apply in the circumstances of this case. If Parliament did so intend, then the owner of a commercial international carrier of goods is here at risk of seizure as forfeit of its ship, as a result of the actions of persons for whom the owner has no apparent responsibility on the evidence before me.
However, I hasten to note that my reservations arise without benefit of submissions of counsel on the application of section 110, which for purposes of this case counsel assumed was here appropriately applied. I accept that position for this case, noting that the issue of the applicability of section 110 was not questioned by the parties and is not here determined.
Assuming section 110 is applicable in the circumstances of this case, the third party process provided under sections 138-141 is of significance for determination of the parties’ rights in goods or conveyances seized, and implicitly in any money or security given in lieu of goods or conveyances seized which are released under the Act.
If Parliament did intend that seizure as forfeit of the conveyance as provided in section 110 is applicable in the circumstances of this case that would lend great significance to the third party process under sections 138 to 141, for determination of the parties’ rights in goods or conveyances seized, and implicitly in any security or money given in lieu of goods or conveyances seized which are released under the Act.
In turning to the issues raised by the special case stated it is useful to consider the meaning and function of the process of seizure as forfeit provided under the Act. “Seize” and “seizure” are not defined under the Act. “Forfeit” is defined under section 2 as meaning “forfeit to Her Majesty in right of Canada”. The Shorter Oxford English Dictionary (1988) defines these words, in part, as:
Seize … II. To take possession …. To take possession of, confiscate (the property of a vassal or subject) … To take possession of by force.
Seizure 1. The action or an act of seizing, or the fact of being seized; confiscation or forcible taking possession (of land or goods); a sudden and forcible taking hold.
Forfeit … 2. Something to which the right is lost by the commission of a crime or fault; hence, a penal fine, a penalty….
It seems clear that within the context of sections 110, 113, 114, 116 to 121, which deal with seizures and returns of goods and conveyances, and the implications of seizures on behalf of Her Majesty for contravention of the Act and regulations, seizures have certain specified implications for the parties. The principal implication is that goods or conveyances seized are forfeit to Her Majesty, that is, lost to Her Majesty as a penalty for contravention of the Act. Under section 122, once seized as forfeit a conveyance made use of in respect of goods in respect of which the Act or regulations have been contravened, is forfeit “from the time of such use, and no act or proceeding subsequent to the … use is necessary to effect the forfeiture of such … conveyances”.
When seized as forfeit, goods or conveyances seized are lost to Her Majesty as a penalty. The forfeiture does not result in the goods or conveyance that are forfeit being held as security for payment of duty or other penalty imposed under the Act for contravention of the Act or regulations. Where the goods or conveyances seized are returned under sections 117 to 119, provision is made for money to be paid or security to be given as the Minister determines, and thereupon goods or conveyances in respect of which the money or security is received cease to be forfeit and the money or security are then held as forfeit in lieu of the goods or conveyance (section 121). Any security so given is thus held as forfeit, not as security for payment of duties or other penalty imposed under the Act. Collection of duties and penalties is otherwise provided for by the Act, whether or not an additional penalty by way of forfeiture of goods or of a conveyance seized under section 110 applies in a given case.
I turn to the principal question as stated in the special case agreed by the parties. That question is “whether or not the Owner and the Insurer, having obtained an Order under s. 139 of the Act, are entitled under s. 141 to the return of the security in the amount of $100,000.00 provided by the Insurer by way of the LOU … and more particularly to cancellation, surrender and withdrawal of all demands for payment under the LOU or otherwise, when the vessel has been returned to the Master by the Department following provision of that security”.
In my opinion the plaintiffs are not entitled under the stipulated provision, section 141, to the return of the letter of undertaking. Nevertheless, the defendants have no ground to hold the letter of undertaking as forfeit, and have no enforceable claim to recover a debt or other payment as a penalty or in relation to forfeiture under the letter of undertaking against the plaintiffs, despite the demand for payment in the amount of $92,620 made by the Minister pursuant to section 133.
I agree with the defendants that section 141 does not require that on the plaintiffs’ application the letter of undertaking should be given to the applicant. That section speaks of “forfeiture of a thing” becoming final, and of application by a person who has a final order made under section 139. The person with such an order is one who has made application under section 138, that is one other than the person in whose possession the thing was when seized, who claims an interest therein, i.e., in the thing seized. The text of section 141, includes reference to “the thing” or “a thing” some ten times, including reference to an interest in “the thing at the time of contravention or use in respect of which the thing was seized” [underlining added] in paragraph 141(1)(b ), and it includes no reference to “money or security” given upon release of goods or conveyances seized. In my opinion, section 141 in referring to “the thing” has reference to the goods or the conveyance seized and not money or the security posted in lieu of the seized goods or conveyance upon release. The “thing” in section 141 refers to the matter seized, not to matters accepted in lieu thereof upon release of a “thing” seized.
Since the conveyance seized in this case has already been returned to the master, section 141 has no application and the Deputy Minister is not required by section 141 to return to the plaintiffs the letter of undertaking provided when the ship was released and thereafter held as forfeit in lieu of the vessel under section 121.
While this determines what the parties included in the agreed statement of facts and principal issues as the principal question to be determined, it does not resolve “all matters at issue in the action” which the special case agrees “shall be determined on the basis of the Certified Record filed in this case”. In particular it does not resolve the alternative expression of the principal question set out in the agreed statement, i.e., whether the plaintiffs are entitled to “cancellation, surrender and withdrawal of all demands for payment under the LOU or otherwise”.
In my view, the parties seek determination not only of the principal question set out at the conclusion of the agreed statement of facts and principal issues, i.e., concerning the application of section 141 as noted earlier; they ultimately seek determination of the action initiated by the statement of claim filed by the plaintiffs pursuant to section 135 of the Act, which is the process for appealing the decision of the Minister.
In my opinion, forfeiture, in the circumstances of this case, cannot be considered to be effective in light of the order made pursuant to section 139 of the Act whereby Anderson J. determined that the interests of the owner and the mortgagee, who together held the totality of interests in the ship, were not affected by the seizure. The principal effect of the seizure under the Act was that the conveyance was forfeit to Her Majesty. If the interests of the owner and the mortgagee, the parties who hold all claims to title in the vessel, by the Act are not affected by the seizure, those interests could not be lost to Her Majesty by forfeit, as a penalty under the Act. Forfeiture, as any other penalty, is applicable upon contravention of the Act or regulations, but the third party process under sections 138-141 is intended to ensure that the interests of owners and others, not in possession of conveyances at the time they may be used in respect of goods in contravention of the Act, and who are not complicit in the contravention, are not affected by the seizure. Thus their interests are not subject to forfeiture.
Here the decision of the Minister was made pursuant to section 131, that the vessel was used in respect of goods in respect of which the Act or regulations were contravened and that the Act was contravened, and a further decision was made pursuant to section 133, that a demand for payment of a debt in the amount of $92,620 be directed to the ship. At the time the decisions were made, in 1991, the vessel had been returned to the master, and the Minister was aware of the order of Anderson J. under section 139. The matter then held as forfeit, in lieu of the vessel which had been released, was the insurer’s letter of undertaking. It was subject to be forfeit only if the penalty, forfeiture, was enforceable against the owner, on whose behalf the security had been posted.
By the order made under section 139 the owner’s interest in the conveyance was not affected by the seizure, and thus was not forfeit to Her Majesty by way of penalty. In my opinion the letter of undertaking held in lieu of the vessel was not forfeit to Her Majesty. In my view the Minister did not have authority to demand payment of a debt to Her Majesty as a condition of release of the letter of undertaking. While subsection 133(1) appears to give broad discretion to the Minister to “remit any portion of any money or security taken” the underlying assumption is that the money or security taken in lieu of a conveyance seized and released, is forfeit to Her Majesty. Where that is not the case, that is, where the conveyance in the totality of its property interests was not subject to be forfeit to Her Majesty, security held in lieu of the conveyance when it is released is also not subject to be forfeit to Her Majesty. The Minister is then without authority to demand payment, whether the matter held as forfeit is the seized goods, the seized conveyance, or money or security given after their seizure for their release.
In my opinion, whatever the Minister’s powers may be to withhold a portion of moneys paid, or to demand payment under security given, upon release of a conveyance previously seized under section 110, they do not include authority to refuse return of the total moneys paid or security given where that is requested by the owners of all interests in the conveyance who have been found entitled to an order under section 139, since their interests are not affected by the seizure and are not subject to forfeiture.
The circumstances are different from those where section 132 is applicable and the Minister finds there has been no contravention of the Act, but the result is the same in regard to the right of the Crown to claim forfeiture of goods or a conveyance seized, or of money or security given in lieu of the goods or conveyance seized and released. In this case, as a result of the third party process, where the order under section 139 relates to the totality of interests in the goods or conveyance seized, and those interests are not affected by the seizure, the Crown is not entitled to claim forfeiture as a penalty under the Act against those interests of the owners.
Conclusion
In brief my conclusions are these.
The plaintiffs are not entitled under section 141 of the Act to have return of the letter of undertaking posted as security in lieu of the vessel Hoegh Mary upon her release from seizure.
The owners, including the mortgagee, having obtained an order pursuant to section 139, have all interests in the vessel, at the time of its use in respect of goods in a manner determined by the Minister to have contravened the Act, and those interests, declared not to be affected by seizure of the vessel, are not subject to forfeiture to Her Majesty. The Minister thus had no authority to demand payment of a debt or other payment owed to the Crown as a penalty against the owner, and Her Majesty had no right to retain as forfeit the letter of undertaking that had been provided as security when the vessel was released from seizure.
In their pleadings both parties request costs but no reference to costs is made in the stated case agreed upon. In the results as I determine them, success may be considered to be divided, at least in formal terms. I am disposed to make no order as to costs, leaving each party to bear its own, unless I am persuaded otherwise after hearing counsel for the parties in writing or by personal appearance upon application filed by one of the parties on or before 21 days after the date of these reasons. If there are submissions in writing by one of the parties served and filed within that time, the other party may respond within ten days of service of the applicant’s submissions. If an application is desired to be made by personal appearance that would be arranged at the early convenience of counsel and the Court.